New Listing: Pendle (PENDLE)

Asset: Pendle (PENDLE).

Category: Decentralised finance (DeFi)

Listing date: June 4th, 2024.

Introduction to Pendle (PENDLE).

Pendle is a decentralised protocol that enables users to execute various yield-management strategies. It is built on the Ethereum blockchain and utilises smart contracts to facilitate the creation and trading of yield tokens.

These tokens represent a claim on a specific yield generated by an underlying asset, allowing users to buy, sell, and trade yields in a decentralised manner.

How does Pendle work?

The primary purpose of Pendle is to provide a platform for users to manage and optimise their yields in a decentralised and trust-less manner. By tokenising yields, Pendle enables users to gain exposure to various yields without having to hold the underlying assets, providing greater flexibility and control.

Additionally, Pendle's protocol allows users to create and trade custom yield curves, enabling them to tailor their yield exposure to their specific needs and risk tolerance.

The core idea is to allow users to tokenise their yield-bearing assets and trade them, thereby enabling them to increase their yield exposure during bull markets and hedge against yield downturns during bear markets.

This capability makes Pendle a versatile tool for users looking to optimise their returns in the DeFi landscape.

Pendle’s history and beginnings.

Pendle was founded by TN Lee and Dan Anthony, two professionals in the blockchain and finance industries.

TN Lee has a background in computer science and has worked on various blockchain projects, while Dan Anthony has experience in finance and trading. Together, they bring a unique combination of technical and financial expertise to the project.

The project was launched in June 2021, with the goal of creating a decentralised platform for yield management.

Pendle was conceptualised to address the inherent volatility in DeFi yields and to bring more sophisticated financial instruments from traditional finance (TradFi) into the decentralised world.

The platform aims to replicate the success of TradFi interest derivatives, which are valued at over US$400 trillion in notional value.

By creating a yield market within DeFi, Pendle unlocks the full potential of yield trading, making advanced strategies accessible to all users.

What problems does Pendle solve?

Pendle addresses several critical issues in the DeFi space:

• Yield fluctuations: allows users to manage and optimise their yields, reducing the impact of fluctuations in both bull and bear markets by tokenising yield-bearing assets into tradable components. This enables users to secure fixed yields or speculate on yield increases based on their market outlook.
• Lack of customisation: enables users to create custom yield curves, providing greater control and flexibility over their yield exposure. This customisation allows for tailored yield strategies that meet individual user needs.
• Centralised risk: By eliminating the need for intermediaries, the decentralised protocol reduces the risk of centralised failure and censorship. This enhances the security and reliability of yield management in the DeFi space.
• Limited accessibility: easier access to and management of yields in a decentralised manner, broadening participation and facilitating a smoother user experience.
• Access to sophisticated financial instruments: By introducing yield derivatives into DeFi, users have access to advanced financial tools that were previously only available in traditional finance (TradFi).
• Enhanced liquidity management: allowing users to trade the principal and yield components of their assets separately. This separation facilitates better liquidity provision and more efficient capital allocation.

How does Pendle work?

Pendle operates through three main components:

• Yield tokenisation: Pendle wraps yield-bearing tokens into standardised yield tokens (SY), which are then split into principal tokens (PT) and yield tokens (YT). This process, known as yield-tokenisation, separates the principal from the yield, making it easier to trade and manage.
• Pendle AMM: The automated market maker (AMM) facilitates the trading of PT and YT, providing liquidity and enabling efficient price discovery.
• vePENDLE: This is Pendle’s governance system. Users can lock PENDLE tokens to obtain vePENDLE, which grants voting power and a share of protocol revenues. This system ensures decentralised decision-making and incentivises active participation in the ecosystem.

Pendle enables several advanced yield strategies:

• Fixed yield: Users can secure a fixed yield on assets like stETH, providing stability in volatile markets.
• Long yield: Users can bet on the increase in yields by purchasing more yield tokens.
• Liquidity provision: Users can provide liquidity with their yield-bearing tokens to earn additional rewards without taking on extra risk.

Pendle Earn vs. Pendle Trade.

Pendle offers two main interfaces to cater to different user needs:

• Pendle Earn: Streamlined for performing high-traffic functions like securing fixed yields and providing liquidity, enhancing the user experience.
• Pendle Trade: Provides a full suite of functionalities, allowing users to trade PT and YT and fully manage their yield strategies.

As the DeFi ecosystem continues to evolve, Pendle’s innovative approach to yield management is likely to become an essential tool, revolutionising the way users interact with yields in the DeFi space. With its unique protocol and user-friendly interface, Pendle is an exciting project that has the potential to make a significant impact in the world of decentralised finance.

Resources:

Pendle Finance website: https://www.pendle.finance/

White paper: https://github.com/pendle-finance/pendle-v2-resources/tree/main/whitepapers

Socials: https://x.com/pendle_fi

Blog: https://medium.com/pendle

CoinGecko: https://www.coingecko.com/en/coins/pendle